Major General, McWatters bullish on Baie Verte region

A letter-of-intent agreement between Major General Resources (MGI-V) and McWatters Mining (MCW-M) is paving the way for development of the Hammerdown and Rumbullion gold deposits in Newfoundland’s Baie Verte region.

Major General owns a 100% interest in the 2,790-ha property that contains the two deposits. Combined indicated resources, based on a cutoff grade of 5 grams gold per tonne, are pegged at 614,000 tonnes averaging 18.01 grams gold.

McWatters can earn 50% of Major General’s interest by funding and completing a feasibility within one year of the deal’s ratification. McWatters must also pay Major General $1 million in cash and stock in two equal instalments, the first of which is due upon signing the agreement, and the second, one year later.

If production is achieved, McWatters will pay Major General an additional $1 million in each of the following three years after startup. The company will also be charged a penalty of $1 million in the event it fails to advance the project to production within one year of completing its study.

McWatters, as operator of the project, is responsible for designing and developing the mining facilities. Proceeds from operations will be evenly split between the companies, after project costs are recouped.

In 1995, an independent scoping study concluded that both deposits could be mined by underground methods at a rate of 400 tonnes per day to yield an average 49,000 oz. gold per year over five years at US$150 per oz. The projections, however, were based on a gold price of US$385 per oz., roughly the average gold price for 1994 and 1995.

A gold recovery rate of 94-97% was assumed (based on metallurgical tests performed on drill core), and 414,000 tonnes of 17.48 grams gold were included in the study. The study recommended the extraction of a 2,000-tonne bulk sample to confirm these results, permits for which were recently received by Major General.

In addition to Hammerdown and Rumbullion, the property contains the Orion gold zone and Lochinvar polymetallic zone. Resources for the former are pegged at 291,000 tonnes grading 8.65 grams gold, based on results from 28 widely spaced drill holes. Drilling in the Lochinvar zone has returned up to 8.4 metres of 6.57% zinc, 0.8% copper, 1.44% lead, 49.6 grams silver and 0.3 gram gold.

In other news, Major General has optioned the Spider property in Ontario’s Hemlo district. The 3,472-ha property covers a 12-km trend of altered felsic volcanic rocks similar to those that host the Hemlo gold deposit, 65 km to the east.

Major General reports that the Spider property features a prominent radiometric anomaly measuring 3 by 1.5 km, and that this structure is identical to the radiometric signature found over Hemlo. The anomaly occurs over the thicker portion of the felsic volcanic pile, where previous work identified zones of feldspar alteration near a quartz-feldspar porphyry intrusive.

Exploration on the property has been sporadic since the discovery, in 1896, of the Fire Mountain sulphide zone, which returned an average grade of 137.12 grams gold. Base metal exploration has prevailed since that time.

The property comprises two claim groups, known as Prairie River and Steel River. Major General can acquire the former by spending $500,000 on exploration, paying $30,000 in cash and issuing 200,000 shares over five years. Acquisition of the Steel River claims requires the expenditure of $1 million, cash payments totalling $100,000 and the issuance of 200,000 shares over five years. The company has begun a $150,000 exploration program on the property, consisting of 85 km of linecutting followed by magnetometer surveys and geological mapping.